Bio-economic modelling of decisions under yield and price risk for suckler cow farms

Applying a bio-economic whole-farm model, we assess the impact of price and weather risk as well as different risk-management strategies on the variability of the gross margin in Swiss suckler cow production. For instance, flexible adjustment of fodder composition, feed stocks, or land use as well as gross margin insurance are considered. Our results show that assuming moderate risk aversion farms’ gross margin variability is rather high, with a coefficient of variation of gross margin ranging from 19 to 21%. Accounting for on-farm risk-management strategies we find that gross margin variability can be reduced significantly, causing only low reductions of average gross margin levels. We find that the use of maize as a switch crop and a market for the trade of roughage are the most efficient risk-management strategies. Our results also indicate that gross margin insurance is not attractive for farmers. Thus in particular promoting better access to markets for feedstuffs provides a valuable opportunity for farmers to manage gross margin risks.